6.  The applicants were born in 1932, 1938 and 1935 respectively. The first and second applicants live in Sofia, Bulgaria, and the third applicant lives in New York, the United States of America. They are brothers.
7.  The applicants’ father owned a factory, together with the adjacent plot, in the town of Gabrovo. In 1947 the property was nationalised under the Nationalisation of Private Industrial and Mining Undertakings Act 1947. In the following years the authorities added a storey to the main factory building, transformed the factory into a school, and transformed the adjacent plot, together with other plots, into a schoolyard. The transformation was reflected in the relevant zoning plan. In 1964 the property was entered in the State properties register.
8.  In 1983 the applicants’ father died, leaving them as his only heirs.
9.  After the Restitution of Ownership of Nationalised Real Property Act 1992 (“the 1992 Act” – see paragraphs 25‑30 below) came into force on 25 February 1992, the applicants asked the mayor of Gabrovo to strike the property out of the State properties register. On 30 November 1992 the mayor granted their request, reasoning that the conditions for restitution were in place and that the applicants had become owners of the property by the operation of the Act. The restituted property consisted of a plot of land of 3,730 square metres, the first storey of the two-storey main building of 620 square metres (the second storey, which, as noted above, had been added by the authorities after the nationalisation, remained the property of the municipality), a one-storey accessory building of 200 square metres, and a second one-storey accessory building of 60 square metres. On 28 March 1996 the applicants obtained a notary deed certifying their title to the property.
10.  In the following years the municipality continued to use the building as a school, with the applicants’ consent. However, the municipality sought to settle the issue of its use of the school. In a letter of 13 March 1995 the mayor invited the second applicant to a meeting to discuss the future amount of rent to be paid by the municipality. The outcome of the meeting was not specified by the parties. In a letter of 3 September 1996 the mayor advised the applicants that the municipality intended to start a procedure for the expropriation of the property or its purchase. When the applicants objected, this initiative was abandoned.
11.  In a contract of 3 August 1998 the applicants allowed the municipality to use the property in return for a monthly rent of 3,646,000 old Bulgarian levs (BGL). The municipality also agreed to pay the applicants BGL 34,637,000 as compensation for use of the property between 15 October 1997 and 3 August 1998.
12.  On 21 January 1999 the municipal council adopted a resolution to start a procedure for the purchase of the property. It appears that the resolution was subsequently abandoned.
13.  On 17 May 2001 the municipal council adopted a resolution for the purchase of the property. The price was set at the equivalent of 180,000 United States dollars.
14.  On 22 June 2001 the regional governor of Gabrovo ordered the suspension of the execution of the municipal council’s resolution of 17 May 2001. She noted, in particular, that since 1960 the main building and the yard had accommodated a school. She went on to say that the property served the needs of the local community and was municipal public property, that it had never been returned to the applicants, and that the mayor’s decision to strike it out of the State properties register had been made in error.
15.  The governor also brought judicial review proceedings to have the resolution set aside. On 31 October 2001 the Gabrovo Regional Court dismissed her claim. It found that the governor’s assertions that the property had not been returned to the applicants and had remained municipal property were ill-founded. On appeal, in a final judgment of 15 July 2002 the Supreme Administrative Court disagreed and set the resolution aside. It held, inter alia, that the school was municipal public property by virtue of the Constitution of 1991 and interpretative decision no. 19 of 1993 of the Constitutional Court (see paragraph 31 below), and had never been returned to the applicants. The court went on to say that since it had not been possible to return the property to the applicants, they were entitled to compensation under the Compensation of Owners of Nationalised Real Property Act 1997 (“the 1997 Act” – see paragraphs 35‑39 below).
16.  Meanwhile, on 1 April 2001 the municipality stopped paying rent to the applicants. On an unspecified date in 2002 they filed a claim for non‑payment of rent against the municipality with the Gabrovo District Court. The municipality filed a counterclaim, seeking a judicial declaration that it was the owner of the property.
17.  On 3 July 2002 the Gabrovo District Court granted the applicants’ claim and dismissed the municipality’s counterclaim. The municipality appealed, but on 20 December 2002 the Gabrovo Regional Court upheld the lower court’s judgment.
18.  The municipality appealed on points of law. On 14 October 2004 the Supreme Court of Cassation granted its claim in respect of the main building. It held, in particular, that the municipality had reconstructed that building in such a way that a new building, different from the nationalised one, had been created. That building had been earmarked to accommodate a school and thus serve the needs of the community. The court went on to say that in view of that, the main building could not have been returned to the applicants and had remained the property of the municipality. The judgment in this part was final. The court remitted the remainder of the case, which concerned the two accessory buildings and the plot of land, for re‑examination. It instructed the lower court to examine which part of the plot existed independently of the school, because only that part could have been returned. As for the accessory buildings, the lower court had to determine whether they had been part of the school compound and on that basis decide whether or not they had been subject to restitution.
19.  Having re-examined the case, on 7 October 2005 the Gabrovo Regional Court dismissed the applicants’ claim and allowed the municipality’s counterclaim. It found, in particular, that under the relevant zoning plan the plot of land, together with another plot, had been earmarked to serve the school. The court went on to say that the two accessory buildings and the plot of land were functionally connected with the main building and served the needs of the school. Therefore, they could not have been severed and returned to the applicants.
20.  On 12 December 2007 the Supreme Court of Cassation upheld that judgment and held that the property in question had always belonged to the municipality. In the court’s view, the property had been municipal public property at the time when the 1992 Act had come into force, and had therefore not been subject to restitution. The adoption in 1996 of the State Property Act 1996 and the Municipal Property Act 1996 (see paragraph 32 below) had not in itself transformed State and municipal property into private and public property, as that transformation had already been envisaged in the Constitution of 1991. The two Acts had simply laid down the detailed rules governing those types of property. The court went on to say that since the property could not be returned to the applicants, they were entitled to compensation under the 1997 Act (see paragraph 26 below). In addition to those findings, the court also endorsed the findings of the Gabrovo Regional Court and held, in particular, that the disputed plot of land was part of a bigger plot, did not feature as a discrete plot in the zoning plan, and could not therefore have been returned.
21.  Following the Supreme Court of Cassation’s ruling of 14 October 2004 in respect of the main building (see paragraph 18 above), in 2005 the municipality lodged a claim for unjust enrichment against the applicants with the Sofia City Court. It sought repayment of allegedly wrongly paid rent in the amount of 151,207 new Bulgarian levs (BGN), plus interest for the period between 3 August 1998 and 31 March 2001. The proceedings are still pending.
22.  On 24 November 2005 the applicants applied for compensation under the 1997 Act (see paragraphs 35‑39 below). On 25 January 2006 the governor dismissed the application, saying that the applicants had missed the one-year time-limit laid down in the Act, which had expired in 1998. The applicants sought judicial review. In a final judgment of 17 May 2007, the Supreme Administrative Court upheld the governor’s decision.
23.  On 27 March 2008 the applicants sent a letter to the chairperson of the municipal council and the mayor of Gabrovo, seeking compensation. Meetings with representatives of the municipal council followed. On 25 May 2008 the applicants sent another letter to the council’s chairperson and the mayor, reiterating their request. According to the applicants, the authorities did not react to that letter.
24.  On 21 October 2010 the municipal council adopted a resolution to close down the school. In April 2011 the applicants sent letters to the mayor, the municipal council and the regional governor, saying that after the closure of the school the property had become private municipal property and should be returned to them.